A national accountancy firm says HM Revenue & Customs has discovered huge numbers of landlords avoiding paying tax – as many as 14 landlords per 100,000 population in some locations.

UHY Hacker Young, analysing data from the HMRC Let Property Campaign, says London commuter towns make up all the top five hotspots for tax avoidance by buy to let landlords .

Ilford had the highest number of landlords per capita in the country admitting that they have underpaid the tax on their property income in the last year (14.3 landlords per 100,000 people). 

In second place was Slough, with 12.6 landlords admitting they had underpaid tax per 100,000, followed by Dartford (12.1), Luton (11.6) and Enfield (11.3).

These disclosures of tax avoidance by buy to let landlords were made under HMRC’s Let Property Campaign. 

The campaign proactively mail shots buy to let landlords suspected of avoiding tax on their rental income warning them of the consequences of tax avoidance.

The campaign has been successful at encouraging millions of buy-to-let landlords to come forward and declare unpaid tax – partly to avoid a full-blown tax investigation. 

The total amount of additional tax collected by HMRC through the campaign amounted to £17.7m in the last year.

UHY Hacker Young claims that HMRC’s Connect AI system detects targets for the Let Property Campaign by automatically cross-referencing data from sources including council tax bills, the Land Registry and even Rightmove and Zoopla listings.

Buy to let is seen as a relatively accessible investment for individuals, with almost 2.7m private landlords in the UK. 

However, many buy to let landlords are not professional investors and may fail to seek professional tax advice, potentially leading to mistakes and omissions in tax returns.

Neela Chauhan, partner at UHY Hacker Young, says: “HMRC sees rich pickings in the buy to let market in terms of unpaid tax. The amounts collected from landlords who have voluntarily come forward suggest they may be right in their assessment.

“Landlords leave themselves vulnerable to prosecution and even a prison sentence if they fail to declare the correct amount of rental income or pay Capital Gains Tax on the sale of buy to let properties.

“Given the consequences of laying low, proactively admitting a possible error to HMRC is unquestionably the prudent course of action.”